BUENOS AIRES—Argentina’s once-disgraced nationalist Peronist movement was voted back into power on Sunday as voters grappling with an economic crisis rejected President
austerity policies, ending the country’s experiment with policies Wall Street had supported.
a Peronist veteran, got 48% support in a vote that has far-reaching consequences for international creditors and the future of a South American trade agreement with the European Union.
“We are going to build an Argentina that we deserve,” Mr. Fernández said to cheers of “Alberto Presidente” at his campaign headquarters here. “The government has returned to the hands of the people.”
Mr. Macri conceded the race and congratulated his successor. The president, a close ally of the Trump administration and a favorite with investors, received a better-than-expected 40%, setting his center-right coalition up to be a strong opposition.
“We’re going to continue working for Argentines, being a healthy and constructive opposition,” Mr. Macri said. “This has just begun.”
Voters were upset with economic stagnation and high inflation, which have fueled poverty in Latin America’s third biggest economy, home to some 44 million people.
“I’ve never seen a government so disdained by the people,” said Juan Pérez, a 27-year-old truck driver who voted for Mr. Fernández. “People don’t have enough to eat. It’s an embarrassment.”
Mr. Macri’s defeat comes amid growing anger against ruling establishments across South America. Protests have erupted in Ecuador, Chile and Bolivia. In Peru, people widely backed the recent closure of Congress, which was controlled by lawmakers from the country’s main political parties.
For Mr. Fernández, the celebration here will be short lived. He faces a mountain of obstacles to turn around economic turmoil that analysts say has its roots in policies of past Peronist governments.
Mr. Fernández, 60, will inherit a cash-strapped government on the verge of defaulting on about $115 billion in foreign-currency bonds. Facing insolvency, he’ll need to quickly renegotiate the terms of a $57 billion bailout from the International Monetary Fund and restructure debt with bondholders, economists say.
“The degree of freedom that he is going to have is not very big. There are concrete problems, problems in the short-term over the debt’s sustainability,” said Damián Zuzek, chief investment officer at SBS Fondos, a Buenos Aires-based investment fund.
The weeks before Mr. Fernández’s December inauguration could be crucial as investors look for signs of policy direction in his cabinet picks and what role his leftist running mate, former President
will play in his administration.
Since August, the central bank has burned through more than $22 billion in reserves, or a third of the total, to defend the peso.
Capital Economics, a London-based consulting firm, says the recession will continue next year, with GDP contracting 2% in 2020. Inflation will remain high at about 50%, and the peso could weaken after already depreciating more than 30% this year.
The peso’s official exchange rate weakened slightly last week to close Friday at 60 per dollar, according to the central bank. But the black market rate on the streets of Buenos Aires tumbled almost 8% on Friday to about 75 as Argentines lined up at banks to withdraw funds in greenbacks ahead of the vote.
Mr. Fernández has pledged to stimulate the economy by boosting consumption and wages while containing inflation with a broad pact with employers. People here won’t give him much time to show results.
“Argentines are suffering economically and very impatient for either an economic recovery or a massive increase in state support,” said Benjamin Gedan, an Argentina expert at the Wilson Center, a Washington policy group. “When they discover the cupboards are bare it will be a rude awakening for supporters of the opposition. They will discover that quickly.”
Mr. Fernández will need to balance the demands of ideologically diverse Peronist factions, a populist movement founded by Juan Domingo Perón in the 1940s. During the campaign, he brought together moderate Peronists and the party’s left-wing base that is loyal to Mrs. Kirchner, who served as president from 2007 to 2015.
Mr. Fernández, a moderate, was once a sharp critic of Mrs. Kirchner’s interventionist policies, including nationalizations of businesses and currency and price controls. He resigned as her chief of staff in 2008. The pair made up after the Peronists suffered a strong defeat in the 2017 congressional midterm elections.
In May, Mrs. Kirchner announced that Mr. Fernández, then a little-known political operative and law professor, would run on the top of the ticket instead of her. Critics contend he will be a puppet of the former president, while he says he will call the shots.
“It is still very unclear what the balance of power will be between Alberto and Cristina. There is a lot of potential for conflict,” said Steven Levitsky, a Harvard political scientist who closely tracks Argentina. “I don’t think either one of them is resigned to the back seat right now.”
Conflict with the party’s left and powerful union backers could boil over if Mr. Fernández is forced to cut spending to reduce a government deficit, estimated to be about 4% of GDP this year, or passes market-friendly policies. There will be little appetite among his leftist base for any concessions with the International Monetary Fund or efforts to open Argentina to global trade.
Mr. Fernández has already come out against a free trade deal that Argentina and three other South American countries that make up the Mercosur block reached with the European Union in June. Mr. Fernandez says the deal would gut Argentina’s manufacturing sector.
“Brussels will certainly be getting nervous. Sunday’s election results signal that the future EU-Mercosur deal is once again under threat,” said John Clancy, a former EU trade spokesperson and now adviser for Washington, D.C.-based global advisory firm FTI Consulting.
The EU has said it is committed to delivering the trade deal and there is a sense in Brussels that heated rhetoric opposing the pact could die down in a year, when the agreement is ready for signature and ratification.
Mr. Macri championed the trade accord as an example of how he was transforming Argentina into a modern economy after decades of protectionism.
Mr. Macri’s conservative coalition also lost in the all-important province of Buenos Aires, where Mrs. Kirchner’s former finance minister,
was elected governor against incumbent Maria Eugenia Vidal. The president’s coalition will maintain a strong presence in Congress, providing Argentina with a robust pro-business opposition, analysts say. On Sunday, Argentines also voted to renew half the seats in Congress’ lower house and a third of the seats in the Senate.
For the president’s supporters, his defeat Sunday was a lost opportunity to make Argentina a more open economy. His election in 2015 was celebrated by investors as he quickly removed currency controls and reduced export taxes that strangled businesses. He reached a deal with creditors from previous default that allowed Argentina to return to global markets.
But his government was slow to cut spending after inheriting a large budget deficit from Mrs. Kirchner, who spent heavily on state subsidies, welfare programs and bloated public service. To plug the deficit, Mr. Macri took on billions of dollars in debt, fearing a social revolt if there was a push for painful cuts. A currency crisis in 2018 forced the government to speed up cuts after the IMF provided a bailout.
Hit by a crisis of confidence, Mr. Macri saw his support slump as he struggled with market turmoil. He recently resorted to policies he once criticized, such as currency and price controls, saying they were necessary to prevent a full-blown economic meltdown.
Carmen Nuñez, 56 years old, wished Mr. Macri would have gotten a second term, believing the economy would improve under his management.
“Peronism is the worst option,” said Ms. Nuñez.
—Alberto Messer in Buenos Aires and Emre Peker in Brussels contributed to this article.
Write to Ryan Dube at [email protected]
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